Credit Suisse plunges into the red after investment banking losses

Credit Suisse lost SFr 1.3 billion ($1.1 billion) in the three months to September 30 as the volatile market in September hit its investment banking business.

Net profits at the wealth management, retail and private banking operations were outweighed by SFr 3.2 billion losses in investment banking. The bank blamed "unprecedented market disruption" in the financial markets in September, saying that its leveraged finance and structured products businesses had taken net writedowns of SFr 2.4 billion on holdings of commercial and residential mortgage-backed securities (MBS) and another SFr 870 million on leveraged loans. The corporate lending business was also affected, it said.

The short selling bans put in place to restrict drops in financial stock had made matters worse, Credit Suisse added. "The temporary restrictions on short selling of financial institution stocks exacerbated fluctuations in those stock prices as liquidity deteriorated, further disrupting the orderly functioning of equity markets and severely impacting the convertible bond market".

The bank still holds SFr 12.8 billion in commercial MBS exposure, and has a net exposure of SFr 2.1 billion to US subprime mortgages - this rose from SFr1.9 billion in June, due mainly to a rise in the value of the dollar.

Credit Suisse said earlier this month that it had turned down an offer from the Swiss government to buy out its exposures to securitised mortgage loans and other illiquid securities through a newly-formed state fund. Its domestic rival UBS will receive up to $60 billion in aid from the fund. However, Credit Suisse has received capital from another source - a SFr 10.4 billion investment from a group of foreign investors led by Qatar Holdings.

See also: Swiss National Bank to take $60 billion in UBS assets
Citigroup and Merrill Lynch losses soar in Q3